VIEWS: Wall Street’s Take on Clean Energy

A Dispatch by SSC Intern Matt Logan

I recently had the opportunity to listen to a webinar given by Steven Milunovich, an Alternative Energy Analyst for Bank of America Merrill Lynch.  He spent 23 years of his career on Wall Street and is widely known for his work as a computer industry analyst, so he has a wealth of experience dealing with investments in emerging technologies. 

While many advocates of clean energy are concerned with global warming and energy security, Milunovich stated that from a stock analyst’s perspective these are not the most relevant concerns.  Instead, he is interested in alternative energy because he believes that over time, the price of foreign oil will go up, and substitutes will be sought out for financial reasons.  These alternative energy options exist primarily in the forms of energy efficiency technologies and renewable energy technologies.

Milunovich stated that firms specializing in energy efficiency products are likely to be the best investment options in the short run.  While renewable energy technologies often need subsidies or renewable portfolio standards in order for utilities to adopt their use, many energy efficiency products are currently cost effective without any subsidization.  Thus, they will be the first alternative energy technologies that generate substantial, predictable profits. 

Renewable energy technologies tend to falter when subsidies expire.  A perfect example of this is the production tax credit for wind power in the United States, which has been an on-again off-again subsidy.  As a result, investments in this technology have not been consistent in the US, which has allowed other countries to claim technological leadership in wind power.  However, in the long run increased global demand for energy will make the widespread use of renewable energy a necessity.  Additionally, much of the global increase in demand will come from developing countries that do not yet have well developed electrical grids.  Therefore, these countries will be able to plan for smart grids that are specifically designed to handle distributed generation, renewable energy technologies.  Thus, in the long run, renewable energy is likely to be very profitable and a wise investment option.   

The slides from Milunovich’s presentation are available at